With that said, not all nations have strong economic prospects. That’s the purpose of this article. Knowing where not to invest is just as important as knowing where you should.

Brunei is one place investors should avoid. This small, wealthy, oil rich sultanate of 400,000 people is heading in the wrong direction.

Here’s several reasons why Brunei is the worst country to invest in Asia… perhaps excluding North Korea.

Brunei is in Recession

We’re not in 2008 anymore. However, Brunei is the only place in Southeast Asia which is now in recession.

Its economy contracted by 2.5% in 2016. Both the IMF and World Bank predict Brunei’s recession will continue for at least another year through 2017. So don’t expect things to get much better anytime soon.

Why is Brunei one of barely over a dozen countries which are currently in recession? Low oil prices are the main contributor.

Brunei’s vast oil reserves made it Southeast Asia’s richest country on a per capita basis. The nation barely diversified its economy outside the oil and gas sector though. This is contrary to Dubai, for example, which used its oil money to become a financial hub.

With crude oil at around 1/3rd of prices seen in 2014, it’s easy to understand why Brunei is going through rough times.

The two other reasons below don’t help Brunei’s situation as the worst country to invest in Asia either.

Brunei isn’t Friendly to Investors

Brunei is also one of the hardest places to invest in Asia. Here’s a few examples.

Foreigners cannot own property in Brunei. You couldn’t even get a long-term lease up until recently. Responding to poor economic conditions, the government began allowing non-citizens to lease property for a maximum term of 99 years in August, 2017.

But this small step forward is unlikely to help much. Investors will still flock to much better options nearby, such as Malaysia where foreigners can own land on a freehold basis.

Furthermore, Brunei doesn’t have a stock exchange. The fact that you’re not able to buy equities or real estate in Brunei leaves investors with just one option: starting a company.

You shouldn’t be surprised that doing business in Brunei is also a pain. The government is difficult to work with and Brunei’s energy sector is the only one with decent long term prospects.

Creeping Islamization

This reason might be controversial. I should clarify that Muslim nations aren’t necessarily bad to invest in. For example, Indonesia, Malaysia, and many others are doing just fine.

Brunei is taking things to a whole different level though. They’re less “Malaysia” and more “Saudi Arabia” with regards to the direction they’re going.

Hassanal Bolkiah, Sultan of Brunei and one of the world’s richest men, is overseeing Brunei’s transition toward a system of Sharia law. It’s happening in several phases and the transformation will finish in 2035.

We’re not here to criticize anyone’s religion. But hopefully you can understand why these things would make some people reluctant to live and invest in Brunei. Less foreign capital means less economic growth.

You should reconsider if you’re thinking of starting a business in Brunei. Don’t go to the worst country to invest in Asia. Head to some of the best ones instead.

EDITOR’S UPDATE: This article was read by over 12,000 people in Brunei since it was published less than two days ago. That’s 3% of the entire country’s population.

Naturally, locals have given us a lot of hate (and some support) because we said Brunei is the worst country to invest in Asia. The truth sometimes hurts. InvestAsian will continue telling our readers the facts about places which aren’t competitive though.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

The source for banning Christmas was linked. The source for cutting off limbs in accordance with Sharia Law is Wawasan Brunei 2035. This can be easily Googled.

Md Amin HjJ

Dear Reid K.
Your are reading too many googles. Try to live in this country. I had lots of foreigner friends and works mate.
When they first few month living here, they had the same exactly impression and statement as yours,
But once they mixed up with the community and understand the culture here they begun to like it.
There is a time 30years ago, when i was in high school my teacher told us a real stories. She went to England with her husband, her husband is an engineer. So she applied to work as a teacher.
An english teacher ask her a question, was it true you Brunei people are living in a cave or on a tree? Most of the people coming back from Brunei shows us the picture they took the people are living on a tree and on the caves.
She answer back, what do you think? Do i look like the one in the picture you see?
The moral of the stories here is, there are people who doesn’t want other people to take the good opportunity available here. They purposely made false statement or impression so the good opportunity will be available for them once they are returning back to this country.

Hj Mo

A couple of folks who come here mistaken and go away pleasantly surprised isnt going to attract businesses to come here to invest and therefore create more jobs. What we need are the big businesses to come here and invest big. Like Hengyi, BMC, Pharmaceuticals but we need more! A lot more! What the author is saying is that bruneian policies are driving these potential big businesses away and therefore depriving Brunei of the foreign investments it so desperately need to grow and develop.

I’m not saying you can’t make money in Brunei. But they’re competing with Singapore and Malaysia. Why should people go to Brunei when the second easiest place to do business in the world is an hour-flight away?

Brunei needs to take these issues seriously if their goal is to become the “Singapore of” anything. And they need to. Otherwise, the only benefit Brunei has over their neighbors is oil. The manufacturers will head toward Indochina and the service sector will go to Singapore.

Of course, Brunei can do whatever they want. Malaysia and Singapore went one way, Brunei might go the other. But I’m not wrong for saying a country in recession for 5 years is Asia’s worst place to invest. Clearly something’s not working, because everywhere else is growing.

Medhat Omran

Can he prove his fake and untrue statement about The Sultan “The good Sultan is doing things such as banning Christmas celebrations, stoning adulterers, and cutting off the limbs of thieves until then.”
I challah him to prove any of his misleading if not totally lies so called facts/ reasons.
Medhat Oman
Sg Hanching

JJ

Woooah, hold on there mate for a minute, dont get your knickers in a twist here. First, get your facts right!
“…fortunate enough to have eyes and ears in the dynamic region” ~ this I seriously doubt! You’re completely dilusional, spewing out baseless assumptions about the country. Your article sound like a broker moaning because you missed out on your cut, trying to pull in investors..(poor you).:(
Yes, Brunei’s GDP maybe down,
their buearacrats which make decisions from behind their desks. I know its not a bed of roses. But whoever said that doing business was going to be a walk in the park??! Investing is always a RISK, no matter where!! Get schooled!!

Bahrin Ahmad

1) Brunei is in recession solely because of the fall in oil prices. It happened to many other oil-exporting countries too. However, the author has failed to mentioned that the non-petroleum sector in Brunei has been growing steadily since the collapse in oil prices. Once the economy recovers, it will be much more diversified than before.
2) Brunei has improved significantly in the Ease of Doing Business Index. For 2017, it ranks at 72nd, even ahead of China!
3) Brunei actually has a much better public safety than our neighbouring countries! An average Bruneian can walk safely on the streets alone at night without fear of getting robbed. The reality is quite different for our next door neighbour.

Why only quote the negative forecasts? Why not mention also the benefits of investing in Brunei? We are a politically stable country with low crime rates… #1 in the word for macroeconomic environment… 1st in the world to issue guidelines on the manufacturing of Halal Pharmaceuticals. Companies established in Brunei are permitted to have 100% foreign ownership…at pioneer status you can apply to be exempt from corporate income tax for a period of 8+3 years…utilities are competitively priced….

As for our sharia law…why would it be a problem for investors? Unless their true agenda of coming to brunei is to commit crimes instead of invest?

Renanko

I am a Country Manager working in Brunei. My company is a Malaysian Sdn Bhd (Private Limited Company) based in KL with operating branches in 9 Malaysian cities, Singapore and Brunei. I arrived in Brunei 4 years ago and don’t know if my opinion matters much. My post reflects my own experience and also from what I gather.

The economy of Brunei is in a very bad shape at the moment. In just 2 years our sales have dropped 65%. HQ has given me an ultimatum that if it doesn’t improve we are pulling out of the country. This is pretty much the general trend for local businesses now. In almost all business events I attended I have heard nothing positive and only pessimism. Contractors for O&G and construction industries suffer the worst, these are the 2 biggest industries in Brunei and it streams down the rest of the economies..

The country has few upcoming mega projects such as the PMB, an economic initiative operated by China. But there are already complaints from local contractors that China is keeping the operations mainly within China companies, it imports supplies from China, it brings in labors and engineers from China, it sub-con to China companies. It doesn’t even do banking with local banks, there is a newly-opened Bank of China for that. Not much trickling to the local economy. The locals will have to wait until 2019 when the refinery opens, but no one is certain what the Chinese companies will do next. The PMB island will have its own farms, its own residential and commercial areas, its own import/export terminal, its own factories. It is like a China special economic zone that is largely self-sufficient by itself and no need to connect economically with the rest of Brunei.

There are also the recent ammonia project with a German company and a Hydrogen supply project with a Japanese consortium. Brunei has these projects once in a while, they celebrate it, but anyone who understand economics will realize those are not enough. The population will grow to 510,000 by 2035, adjusting to inflation if their people want to maintain the current standard of living GDP should ideally grow 5-6% every year. But Brunei GDP is shrinking. It was $13.7 billion in 2010 and now $11.4 billion. Even before the oil fiasco it was growing only a mere 2-3% on average.

With O&G and construction down, the next most lucrative opportunities can be found in F&B and retail. But their religious authority is getting more unhinged by the days. While I do not wish to be seen as criticizing or interfering others religious matters, Brunei has come to a point where religion really inhibits economic growth. Their growing list of prohibitions, their increasing religious zeal, their public dining ban during the fasting month, and their recent mandatory Halal permit, are all pushing F&B businesses to the edge. There are a lot of new restaurants, cafes opening in recent years, this give a wrong impression of a boom. In reality people are simply rushing to fill up one of the few remaining opportunities left in the country. No one is counting how many of them closed after the initial hot period.

Retail is greatly affected by the favorable exchange rate vis-a-vis Malaysian ringgit. This is confirmed to me by managers of several large retail stores I know in the country. In general, sales is not going up but dropped 20% over the years. Bruneians are increasingly buying stuff in Miri, a neighboring Malaysian city. They can save 30-40% doing grocery there, 50% on furniture, even after deducting the transport cost to Brunei, up to 60% in household electrical devices like lightings. Whatever you can get in Brunei, you can get it cheaper in Miri with more varieties. This is evidenced by a recent report that Bruneian visits to Miri jumped by 50% year-to-date. The recent opening of a new Uniqlo branch in Miri, which does not have a presence in Brunei, caused a 8km queue across the border.

The government is incurring a huge budget deficit and is now actively looking for ways to cut expenses. There is not much to move the economy around. They have reduce the red tapes and make certain business procedures easier, but what is ease of business if there are not much business opportunities.

Banking and financial services are the rare bright spot and they recorded impressive growth even with the recession, but this is an industry dominated by few oligarchs and beyond the reach of most common people. The rest like Halal food and pharmaceuticals industries, they are counting chicks before they hatch. Not only Brunei, Malaysia has announced its intention to be a global halal hub. How they can compete with Malaysia Halal, a very well-established brand, is beyond me.

Brunei used to be very safe. It still is but crimes are becoming an issue, many of which go unreported. This is sort of expected, bad economy, unemployment rises, crimes will definitely go up. Just last week our company’s workers quarter got broke into, 2 gas cylinders stolen. For the neighborhood it is the third time in 2 months. Bruneians shouldn’t boast about walking alone at night. You can walk safely in many Asian cities. Before Brunei I was sent to Kota Kinabalu (KK), walking at night is very safe in KK and I never get robbed, and KK is more vibrant than Brunei. Labuan is likewise very safe, but what’s the point if it is a dead island with not much economic opportunities and Labuanites flocking to KK for jobs.

Before coming to Brunei I had the impression that Bruneians are rich, well they say one of the world’s richest in GDP per capita. But now I am here I see the reality. Most people are hanging in the balance, surviving from paycheck to paycheck, barely any savings and every month I am sure to encounter some locals trying to borrow money from me. Brunei per capita is 26,000 USD but I believe over 80% don’t have anything near that kind of money in their bank.

What Brunei likes to do is to paint a rosy picture, shielding away from critical opinions and bring up endless list of ‘future potentials’. What’s the point of all these grandeur projections? South Korea has diversified, Singapore has diversified, Taiwan has diversified, Luxembourg (a country with nearly the same population as Brunei) has diversified, Dubai has diversified. Their industrialization process took only 20-30 years. Now at its 30th years of independence Brunei is still here with O&G making up over 90% of exports. Things just won’t move how do you expect it will in the next 30 years?

Toosin

Reid, your statement about Brunei being the worst country to invest in Asia is totally unwelcome, factually incorrect and misleading. Despite claiming you ‘have eyes and ears throughout this dynamic region’ you seemed to have missed a lot and your facts are both wrong and outdated. Investors from Canada, Turkey, China, Japan, Malaysia and Taiwan are already investing in Brunei and they came to invest here for many reasons.

You have also failed to mention the reforms that we have done that made us jumped a significant 25 places to rank 72 out of 190 economies worldwide, according to World Bank. We are the most improved economy in the world for the second year running. Since 2015, our corporate tax has been reduced to 18.5% as opposed to 22% in your statement. With no personal income, sales, payroll or capital gains tax, we are a better option for foreign investors. So your statement that Brunei isn’t friendly to investors is totally wrong. I suggest you do more research to make your article credible.

Ease of Doing Business only measures a country’s ease of doing business.

The difference is that Vietnam, Indonesia, Philippines, Laos, and Myanmar are all growing by 5%+ per year.

Wang

Hey Reid, there is nothing to be afraid of Sharia Law if you come to Brunei as a good law-abiding visitor. When we visit other countries, we respect the laws too and do not want to get into trouble either. Like any other laws, Sharia is a strong deterrent against crime and other social ills. The law is formulated not out of whims and fancies and the penalties would not be applied indiscriminately for sure. Let me also make a little correction about the Christmas ban. If Christmas is banned, why would you think it is still a public holiday in Brunei?

If you want to understand more about Brunei, I suggest you pay a visit and see for yourself the reality rather than relying on your so-called ‘eyes and ears’. Also, please don’t let your ears hear what your eyes didn’t see.

People tend to be pushed away when you make them live by the rules of a certain religion… regardless of which religion it is. Would you invest in a country which banned Ramadan? Probably not.

The fact that people still have a day off on Christmas doesn’t change the fact that celebrations are banned.

I’ve been to Brunei before.

Wang

Let me clarify, Islam is the official religion of Brunei. Non-Muslims, however, are free to practice their faiths but only among themselves. Public displays of non-Muslim festivities are prohibited as this could be construed as attempts to propagate religions other than Islam. Christians continue to celebrate Christmas in private, within the church compounds and within their own communities.

i have to disagree.. i travel frequently to brunei, yes if u invest into stuff that is AGAINST the identity of the country ofc its a disaster. but in so many ways brunei is unique. the right investment esp new and innovative will be great esp in education, health and tourism. AND WTH is creeping islamization anyways?
i visited my friend celebrating Christmas last year! 2 of my friends moved permanently from australia and the states. Brunei celebrates more festivities beside Eid and Christmas u know, in Borneo we celebrate a lot! including brunei.
FYI : islamic laws is only for muslims. if you are not muslim, you follow the civil law not the sharia. My God..at least travel a bit man.

M.Aslam Ibrahim

although this article isn’t very credible, but it’s not far from the truth. business is all about numbers n statistics. humans are a statistic. business is about dealing with humans. the more number of humans, the better the statistics, the better the biz. brunei has a small population and very little visits from the world. hence it’s another reason for a bad investment

Wang

Get your facts right, that’s the point we are trying to get through to you!

I love visiting Brunei! It was a really cool place to see. But I imagine economically it doesn’t offer much of anything for investors.

meBrunei

Dear, dont argue but think. In writing article put pros and cons but never bias and giving fear. Every opportunities comes with difficulties. Ofcourse brunei still has to learn alot from neighbouring spore and malaysia. As a bruneian, I also feel we could do alot better, nevertheless we are developing and growing tho’ at a quite small step-at-a-time. My personal say to editor never condemn any person or any nation because you dont really know how hard that person or that nation have been trying to be better than yesterday

siapanah

I’m a Bruneian and even I don’t disagree with the points addressed here. Being surrounded by people who work in business industry and companies related to money I am also aware of the real life difficulties of pulling investors to Brunei. Yea truth hurts but it’s happening people.

A simple way to put it. Investors at the end of the day just wanna make money. Why waste so much time to invest in Brunei because there’s so much obstacles and paperwork to do and the government is such a pain to work with, when there are other countries that are easier to work with that can give what an investor faster what they want which is money?

I do have one question though, you said “Brunei’s situation might improve if locals were less eager to defend an economy which has been in recession for the past five years.”

Could I ask if you could enlighten what are some of the ways to fight against this? I’m sure you have more insightful expertise regarding this

Don’t get me wrong: I have suggestions. But I see no reason to get ahead of ourselves and spend time writing them when people like you still want to defend a 5-year long recession.

For you, my suggestion is the same as above. Realize there’s a problem. You’re better off directing your frustration toward policymakers instead of me.

Or you can continue talking about how great 72nd place is. Your choice.

Saiful Sufri

Well. You are not wrong

amk

I’m a Bruneian. I agree with some of your article. Hard truths to face. But I think your statement that Brunei is the worst country to invest in is a bit hyperbolic, especially since your main basis seems to be the recession. Sharia law shouldn’t be a huge deterrent for investors. The UAE has elements of Sharia law and they’re doing fine.

I would argue that there is actually opportunity if you were to look for it. We are well aware of the challenges facing our country and, although belatedly, we are taking steps to address them. What foreign direct investors will find is a government and country that is eager to attract investment and more than willing to facilitate wherever possible.

So your economic facts may be accurate, but I think that the other arguments are not as well founded.

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